Pause, Play & FastForward; The Present and Future of the Music Industry

Last year Nielsen in conjunction with MIDEM conducted a large-scale study on the music consumption habits of over 12,000 people in 53 countries across the globe. While back in September 2010 they released the topline results of the study they have since spent a considerable amount of time delving deeper into the data and just recently published a paper called ‘The Hyper-Fragmented World of Music’ which can be downloaded from the Nielsen website here. It’s a lengthy report addressing “some of the most fundamental issue facing the industry today” and well worth the read. But if you don’t have the time, we’ve distilled some of the key insights from the paper below:

– Music video (i.e. YouTube) is the most popular means by which people are consuming music. Nielsen call this the “watch” habit and believe that there are opportunities for “more explicit monetization” from online video channels.

– Legal music downloads are still growing with downloads to mobile devices promising to play a more significant role in the future.

– Overall about 25% of the surveyed sample used music streaming sites like We7, Spotify or Grooveshark. To put this in perspective, this figure is more than the 18% who legally downloaded music. With awareness and understanding of music streaming sites at 63% of the total sample there should be room for growth in streaming adoption but the challenge will be in persuading people to pay for such a service by adding additional incentives such as exclusive track access and discounted event ticketing.

– Mobile music application development is fertile ground both for marketing tools (artist apps) and also as a revenue generator (streaming / music discovery apps).

– 21-24 year olds are the “nucleus of the music industry“. They are the highest consumers of music online and the most likely to adopt new music technologies, thus drive innovation in the area. Conversely they are the least likely to purchase physical product in a record-store context and therefore the industry must pay attention to their habits and engage with them in order to ensure their potential as customers does not go untapped.

The paper concludes by noting that the diversity of music consumption patterns is a situation in which there are “as much potential as there are challenges” and while the old music business model might be dead, there is unlikely one single business model which can replace it. Their end statement is worth reading in its entirety:

“The real issue to solve is that the channel or source of music is often regarded as much as a marketing tool (audio‐video sites, apps) than as a revenue generation channel. It is somewhat confusing for the consumer, who does not make a distinction between being exposed to music via marketing and promotion and looking proactively in the “free” digital jukebox for what they want to listen to. In a future where this previously held consumer distinction between conventional marketing, purchase and consumer‐led listening is blurred, how should the industry market and generate revenue effectively? Gradually, it may well be that the B2B part of music industry revenue will be as important as the revenue generated directly with consumers”